What is a 'Traffic Acquisition Cost - TAC'
A traffic acquisition cost (TAC) consists of payments made by Internet search companies to affiliates and online firms that direct consumer and business traffic to their websites. Traffic acquisition costs (TAC) are a critical cost of revenue for Internet search firms such as Google, Yahoo and Baidu.com. TAC for these firms is watched by investors and analysts to ascertain whether cost of traffic acquisition is rising or declining. Rising TAC has a detrimental effect on profitability.
BREAKING DOWN 'Traffic Acquisition Cost - TAC'
Many Internet companies report revenues both on a gross basis, and on a net basis that excludes TAC. One key metric for these companies is TAC as a percentage of advertising and search revenue, with a rising percentage indicating cost pressures on profitability. Sometimes companies will mention payments excluding traffic acquisition costs using ex-TAC.